ICT Security and Services-Related spending will remain resilient, says AMI
July 20, 2016 – New York, NY – According to AMI’s Global Market Model (GM), based on extensive annual tracking of UK’s small and medium sized businesses (SMBs), these businesses were projected to spend $61 billion on ICT products and services by 2020, up from $45 billion in 2015, a 6% CAGR. As these businesses navigate Brexit, our initial analysis suggests up to $7 billion (or 5%) of total ICT spending slated to occur during the 2015-20 time-span could be wiped out. Security-related spending - $1.8 billion in 2015 and $2.0 billion in 2016 – is expected to hold steady as businesses ensure – with help from their channel partners – that all data assets are fully secure and compliant during this transition.
2016 and 2017 will see close to flat year-over-year growth in SMB ICT spending, which will pick up later half of 2018 as businesses work through the full cycle of this event.
Datacenter Infrastructure Market in the Bull’s Eye
Brexit will cause disruption across a broad spectrum of ICT categories as UK SMBs take pause, but the following will be key areas of impact:
1. Datacenter-related spending will likely slow down as the financial services sector – the biggest customer for UK data centers – undergoes geographic reorganization. A fair amount of financial services businesses will likely relocate to mainland Europe. Per AMI’s GM, there are close to 50,000 SMBs in the financial services sector, and account for $3.5 billion in annual ICT spending. Further, EU businesses in other vertical industries will now move their data to local datacenters, further impacting the UK based infrastructure market.
2. Any hiring freezes will negatively impact cloud-related spending, as businesses wait to subscribe to more SaaS/IaaS seats. AMI’s 2015 SMB survey showed over 45% planned to hire in the next 12 months, but we now expected no more than 15-20% to follow through on their intentions. Over 0.5 million UK SMBs are presently using cloud based e-mail, another 165,000+ using productivity, and almost 200,000 firms using CRM, for example. Total SMB cloud related spending stood at $8.3 billion in 2015, and was projected to more than double by 2020. Post-Brexit, we may expect total cloud spending within reaching distance of $15 billion by 2020.
3. The automotive sector could see a significant slow down – the UK exports over $45 billion of autos to the EU and imports about the same amount from the EU annually. Auto and parts dealerships will likely experience job losses while tariffs and related rules and regulations are worked out. Consumer could delay purchasing new cars as questions regarding parts and service availability bubble to the top, not to mention skilled auto mechanics that are not UK citizens will likely need to relocate as well.
Yet some sectors and ICT categories will continue to hold up in the midst of this storm, said Deepinder Sahni, Sr. VP at AMI-Partners.
Professional and ICT-Related Services and Security Solutions Stay Resilient
“SMBs in the business of helping clients navigate and transition through the Brexit uncertainty will do well – professional and personal business services, including law and tax firms, real estate, ICT services, and IT security/compliance vendors”, said Mr. Sahni. Businesses across the board will need a wide range of services – from relocating offices to checking the validity of their trademarks and contractual terms across borders. There are over 600,000 SMBs in the UK services sector and collectively account for over $20 billion in annual ICT spending. We expect these businesses to hold up even as they have to navigate the larger macro effects of Brexit.
IT services in high demand will be tied to establishing compliance around data residency, securing IT equipment and data assets in a fluid environment, ensuring cloud service provider datacenters are legally compliant, software licensing terms are valid in the country the software is being used, among others. ERP software vendors will need to ensure cross-border documentation and rules are modified and communicated out to their UK/EU SMB customers. Clearly, this is a high cost for businesses to pay, but channel partners providing such services will be extremely busy over the entire duration of this transition. IT service and support consumed by UK SMBs in 2015 amounted to $11.5 billion, growing at a CAGR of 5% to 2020.
ICT Vendors Can Leverage This “Moment of Truth”
t is imperative IT vendors quickly develop their playbooks and put them into action via their channel partners. SMBs will be looking for answers on the ICT front and calling their channel partners for advice. According to Mr. Sahni, “Channel partners will need clear guidance from vendors on communicating and executing transition roadmaps for their customers. While nettlesome, Brexit provides a “moment of truth” in the customer journey – an opportunity for ICT brands to show their customers that they care and are up to the challenge.”
AMI is updating the Global Market Model (GM) to break out the impact of Brexit across 100+ individual ICT categories. This impact will be further delineated across individual EU countries, 19 vertical industries and 8 employee size bands encompassing all small and medium sized businesses. AMI Trackers will further actionable go-to-market insights.
For more information about AMI, or our global SMB research, call 212 944 5100 or e-mail email@example.com.